Gut rehab inherited property tips?

Question

Hello, long time podcast listener, first time poster. I inherited a 4 flat property in the Chicagoland area which needs to be gut rehabbed as there haven’t been any major updates done in 40 years and it’s in bad shape. As someone with no properties, I would like to rehab this, live in 1 and rent other units out.
I am seeking any advice as this will be quite an undertaking and plenty of room for mistakes.

are there any good financing options or programs with lower interest, or possibly government grants as I will be doing lots of things to improve energy efficiency etc ?

does any one know of a honest rehabber in area that won’t steal material or won’t give me a great deal by installing things that will break in 5 years?

How much is gut rehab for a 4 unit with quality materials cost? Is this done per square foot?

I plan to keep this long term and I want high quality materials to go into it so I am not repairing it because of poor materials or shoddy work?

also I presume I will need an architect? Any recommendations are welcome.

Please let me know if there any other other tips or hacks I can use to save money long term or tips to not to ruin my life during this process?

Thank you!

Prashanth Mahakali · Answer

@Jonathan Klemm thank you! Always appreciate the public referral.@Bobby Schimune good luck on your firstProject. Rather than think of contractors as someone who will “get” you, interview a few and get them to open up on the project. Develop trust over a period of time by meeting them at their job sites. Talking to their clients. Jonathan Klemm will set the standard for you.With regard to the project, having an Architect is essential for the scope of your project. Reach out to a few and ask them for referrals for contractors. Having a good set of bid documents is essential to get project costs that are accurate. If the drawings have less information then you are having to make decisions during the course of the project. This usually means surprises.Once you form your reliable team, there is less chance of the project going in a wrong direction. Good luck!

John Warren · Answer

Account Closed. I would not look for subcontractors if I were you to save money. With this sized project, the right GC will have better subs than you which will lead to a better finished project. Finding your own plumber, electrician, hvac tech, roofer, window guy, etc is a trap. I have finished a few full-on gut rehab projects on buildings that are 13 units and 22 units, and the other thing you will want to be clear on is how change orders will work. Hope this helps!

Jonathan Klemm · Answer

@Paul De Luca thank you for the tag brother! Hey Account Closed - Congrats on the first post brother! I remember being in your exact position....listened to all the podcasts and then jumped into the forums which was such a great decision for me. Sounds like you have an amazing opportunity on your hands! Starting with a big rehab is awesome and I'd be happy to talk more to see if we might be a good fit (shoot me a message on BP and we can connect). It's awesome that you are a forward thinker and want to make sure the work is quality and installed properly. Real estate is definitely a long-term play and if you continue to think that way only good things will come your way. As far as architects, we have several we work with. The two main Chicago ones on BP are @Prashanth Mahakali and @Samuel Pavlovcik

Paul De Luca · Answer

Account Closed For financing - consider using a home equity loan, HELOC, or cash out refinance. @Jonathan Klemm would be a good person to talk to regarding rehab.

Nate Sanow · Answer

If you inherited it free and clear, doing a cash out refinance should give you the liquidity to do much or all of the work. A bridge loan is another term some lenders may use. Now, as for the gut job, that is market specific but in my area cosmetic touch up jobs are about $10-20 per foot depending on finishes really, like if someone wants granite vs laminate countertops. In contrast a total gut job can easily be $50-60 per foot. If you are talking about down the studs, to remove plaster walls, that is probably a minimum in your area. The book by J Scott in the BP book store has a book on how to estimate rehab costs that I REALLY recommend reading. Learning how to co-create your “scope of work” will he huge for you. Google that phrase and look at examples and begin making practice templates. If you are up for it schedule wise, begin getting bids for each area of the project. If you have no experience it is often the GC who will taken advantage of you and a lot of how GC’s are able to do that is by an entire project being inside a bid. That is something I personally try to avoid and what helps me avoid it largely is by staying in control. This might not be entirely relevant as you might not want to or be up for self management of the entire project… but you need to learn the language of the SOW and going into it with that mindset will force contractors to respect you.

Jared W Smith · Answer

I am glad others have chimed in on hiring an Architect. Yes, get and review local Architects familiar with this type of work and can be your eyes and ears for the project ensuring they have your best interest in mind to prevent Contractor mishaps and/or taking advantage of you. @Crystal Smith has a good point to engage a self-certifying Architect however realize this puts more liability on him/her and could be more costly, however typically when done here in NYC, it makes getting permits much much quicker. Weigh in on the odds for either approach. All the best Account Closed -Jared W. Smith, RA - Principal Architect at Architect Owl PLLC

Crystal Smith · Answer

I will send you a DM with recommendations on financing.Regarding programs that provide grants for energy efficiency- There are a number of programs for homeowners including solar panels; green housing incentives. I could give you a list but you'll actually find them by just doing a google search.Chicagoland is a large area so can't make a recommendation on a contractor without narrowing down where in Chicagoland.There are a few architects on this forum. Whatever you do, if the property is in the city of Chicago pick a self-certified architect. DM me & I'll make a recommendation.